When the offer on your home is accepted, you’ll start the process of securing the mortgage for your home. Lenders will give you the option to lock or float your mortgage rate prior to closing (which typically happens 30 days after the offer is accepted).
“Locking” your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that’s the rate and price you get, regardless of what happens in the financial markets. If rates go up, you’re protected; but if rates go down, you won’t benefit either — you close your loan at the rate you’ve locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don’t close your loan on time, you could end up paying a higher interest rate.
Every day, LendingTree posts our recommendation (below) on whether you should lock or float your rate, so make sure to check back here prior to making your decision.
Mortgage rates might fall today, perhaps appreciably. However, that forecast is based on early market trends, and those frequently change speed or direction during the day. So an even sharper fall, a holding steady, or a rise all remain possible. Still, if we were currently buying a home, we would float our rate now, and revisit that decision on Monday morning. Read on to discover why you might prefer to lock.
Our prediction could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies, including continuing fallout from the president’s political battles. Many attribute the most recent falls in mortgage rates to those battles as they are perceived as distracting the administration from its pro-business agenda. Yesterday’s terrorist attacks in Spain are also unsettling markets. Additionally, a speech by Dallas Federal Reserve Bank President Robert Kaplan at 10:15 am (ET) today could have an effect, should he say something unexpected.
After inching up earlier in the week, average rates for 30-year fixed-rate mortgages yesterday edged down for a second consecutive day. That saw them set a new low for 2017. What happens next will depend on whether relevant news becomes more or less positive in coming hours and days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down. However, that simple correlation is far from rigid, at least over the short term.
Some experts might urge you to lock your rate the next time a significant rise looks likely, particularly if you need to lock anyway within the next few weeks. Others might suggest you continue to float, providing you have time to ride out the coming (near-inevitable) ups and downs. But neither group has a crystal ball and there remains a real possibility of volatility. So, either way, you are taking a chance. Only you can decide on the level of risk with which you are comfortable.
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